Tag Archives: CERC

In an attempt to help the consumer to understand the Open Access (right to choose own source of Power), IndianPowerSector.com has come with a comprehensive report on Open Access with is second in series. The report explains various factors affecting price in Open market, the below is the exclusive article from the report on various states in brief.

Even after 11 years of the effect of The Electricity Act 2003, Open Access is still a distant dream for many stakeholders of the sector. Reasons may be transmission bottlenecks or political will, the end result is the same. Though bulk consumers trade around 40% of the power traded through leading power exchanges to procure power by-passing the local utilities, serious issues in Open Access still remain.

Indian GDP is stalled by 0.4% because of power cuts to the industries as per FICCI and the loss of markets because of higher prices, which is the key resultant of higher power procurement cost, is still not found in books of India Inc. A 100% Open Access implementation throughout India by empowering the infrastructure, consumer and local utility is very much important in the scenario to minimize this loss.

This year after elections, there will be a positive scenario in the Indian markets providing lots of opportunities for the industries to grow globally by imparting the competitiveness in prices by minimizing the cost of power procurement. Open Access is a one stop solution for this objective.

INTRA-STATE OPEN ACCESS

Rajasthan is one of the most favorable state for intra state Open access. Being a hub for electricity intensive industries like Textiles, Granite and Chemicals, the need for reliable and economic power is very prominent. Rajasthan is among the leading investment destinations in India. Hundreds of Industries are expected to come up in IT and Manufacturing fields in Mahindra World City, Jaipur and the areas facing National Capital Region.

In this state, the difference in cost between the traditional power procurement and open access is considerable at 11KV and significant at 33, 66KV. A bulk consumer of 11KV can save up to Rs.2.52 Lakhs per month on the other hand bulk consumers at 33KV and 66 and 132KV can save Rs.26.28 Lakhs and Rs.34.92 Lakhs per month respectively.

Apart from economic power procurement, the reliability factor is very much important because scheduled and unscheduled power cuts in areas of Udaipur, Jaipur and Kota are prominent and the cost comparison between DG sets as well as opportunity cost for the businesses in highly regarded with Open Access.

Andhra Pradesh is the state with the most cost beneficial scope of intra state open access for industrial consumers. In this report, the comparison for industrial colonies and industrial tariff has been done with open access landed cost. For each Discom of the state, the comparison gives positive results for an industry drawing at 11kV. The highest difference for the cost of power through Discom and Open access is given by NPDCL that is of about Rs1.98 per unit. On a monthly basis, this saving amounts to Rs.71.28 lakhs. Also, if one opts for open access for industrial colonies, per unit cost benefit comes out to be Rs.1.10 for consumers procuring power from CPDCL at 11kV voltage. This amount grosses up to Rs.39.6 Lakhs on monthly basis. The net saving for this category of consumers (5MW) procuring power from open access over other Discoms of the states is much higher.

Hyderabad and Vishakhapatnam – the most favorable cities for upcoming ITIR projects proposed by the Government of India, can attract even more of such projects by providing a better inter-regional transmission infrastructure as it is a major bottleneck now. The count of 623 consumers in the state is a clear indication of feasibility of OA in the state.

NAGPUR: Mahagenco has been frequently hauled up by environmentalists for not taking measures to control air pollution. The company has always defended its conduct by saying that poor quality coal makes it difficult to do that. Now, a Central Electricity Authority (CEA) audit has revealed that even fly ash utilization by Mahagenco is far below the minimum expected level.

Ideally, the entire fly ash should be used, but CEA considers performance by companies in the range of 75% to 100% utilization as satisfactory. However, Mahagenco’s utilization figure is 63%. The national average is 55.6%. The biggest power producer NTPC has a very poor record of 43% utilization.

While many generation companies fare even worse, there are some utilities, mostly private, that use the entire fly ash. CEA has compiled data for 66 companies for the first half of 2013-14. Sixteen power utilities have used the entire fly ash generated by them. Twenty-one have used up 75% to 100% while the remaining 29 are below 75% usage. Mahagenco falls in the third category.

During this period, Tamil Nadu has achieved fly ash utilization level of more than 98% while Delhi, Gujarat, Jharkhand, Punjab, Rajasthan and West Bengal achieved fly ash utilization level of more than 70%.

Essar Electric Power Development Corporation Limited which is a Category C trader , according to which they can trade upto 500 MU in FY-2013-14. However, the company approached CERC , to allow them trade power volume more than prescribed i.e 120% above the limit.

Taking into consideration CERC allowed the company to trade power above limit. The company has to submit the extra fees as per category II trader.

The Electricity Act 2003 (EA-2003), introduced the idea which allow power consumer to have choice to choose their power supplier from the same state or even outside the state apart from the designated DisCom of the area. This was termed as “ Open Access”, the act defines OA as “non-discriminatory provision for use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the Regulations specified by Appropriate Commission.”

The Regulations for availing Open access have been formulated by CERC for accessing the Inter-state Transmission network; and by SERC’s for accessing the Intra-state Transmission and Distribution network in respective states.

Open Access is one of the most important features of the EA 2003 wherein, distribution companies and eligible consumers have the freedom to buy electricity directly from generating companies or trading licensees of their choice and correspondingly the generating companies have the freedom to sell to any licensee or to any eligible consumer.

However, after 11 years the Open Access still remain a mystery for most of the eligible consumers. The government support in this matter is limited and very less initiatives were taken up to educate the consumers about OA. On the other hand the DisComs are most of the time reluctant to provide clearances for OA with fear of losing their premium consumers. All this led to the uprising of many consultants/service providers which provide services regarding OA.

IndianPowerSector.com together with Power Plus Consultants , has come with a Report showcasing some of the states with snapshot of how to get OA and what are the different charges applicable. The report is a Pre-cursor to the next extensive report on Open Access market in India. The gist of the report can be summarized in the table below:

Challenge

Remarks

Approvals from Govt Officials

Biggest challenge in front of various solar generators and consumers is to get approvals from Govt officials of discoms and sldc’s

Before applying to discoms and SLDC, a generator or consumer should know the proper procedure and application formats

Lack of Knowledge

In various approval you have to deal with assistant engg., junior engg. whom has little or no knowledge of Open Access

Commission should make a single window clearance system for Open Access

High Open Access Charges

Some states like Punjab, Maharashtra has a very high open Access Charges which is a major roadblock in the implementation of Open Access

Solar Developers should try to identify those states where the Open Access charges are low

Cross Subsidy Surcharge

Some states has a high mismatch between the tariff of different category of consumers resulting in high cross subsidy surcharge

Nation Tariff Policy says tariff should be in the range of +/-20% of the average cost of supply, so all states are moving towards it and gradually in future css becomes zero

Installation of ABT meter

ABT meter is to be installed at respective substation of the clients but space avalabilty is biggest problems at these substations

ate-run NTPC has filed a writ petition in the Delhi High Court, seeking a stay on the tariff guidelines recently issued by Central Electricity Regulatory Commission (CERC) for power plants catering to more than one state. Arguing that the regulator lacked consistency in its principles for tariff determination, the PSU said the new norms would hit its profitability.

The new CERC guidelines will come into effect on April 1 and remain in force till March 31, 2019.

The NTPC stock had tanked to a five-year low on February 24, following the regulator’s final tariff order.

The new norms are aimed at increasing the operational efficiency of power plants, but would reduce profits of the PSU’s ageing plants. The regulator has removed many incentives for generation and transmission, which it thought added to inefficiency and was unfair to the consumer. Many of NTPC’s older plants have higher cost structure and the new regime would constrain its ability to recover such costs.

A senior CERC official confirmed to FE that NTPC has legally challenged the new tariff regulations.

The details of the grounds on which the petition has been filed were not known immediately.

An Indian rule requiring wind farms to predict output or face fines has been temporarily suspended as the regulator reconsiders the best way to ensure stability of the grid, which suffered the world’s biggest outage in 2012.

“The mechanism has been put on hold,” said Sunil Jain, chief executive officer at Hero Future Energies Pvt. and president of the Wind Independent Power Producers Association.

The Central Electricity Regulatory Commission last year ordered wind farms to predict their day-ahead generation within a 30 percent band. Developers including Tata Power (TPWR) Co. and Goldman Sachs Group Inc.’s ReNew Wind Power Pvt. protested the directive, saying it was impossible to comply with and that penalties would wipe out profits in an industry that has drawn about $10 billion of investment since 2011.

“Not a single project has been able to produce data within the margins,” Jain said in an interview in New Delhi this week. “It defeats the purpose. It’s too inaccurate.”

Gireesh Pradhan, chairman of the Central Electricity Regulatory Commission, wasn’t available to comment by phone and didn’t respond to an e-mail.

Forecasting of wind generation, an intermittent energy source, is carried out to help stabilize the grid in some parts of the U.S. and Europe, where surging wind output has driven wholesale electricity prices below zero and forced utilities to pay consumers to take power as supply exceeded demand. In India, scheduling would allow wind power to be sold across states and help authorities prepare network upgrades to accept more clean energy in the future.

The move of Larsen and Toubro Ltd (L&T), India’s largest construction and engineering company to sell its 1400 MW Rajpura thermal plant comes as a shock and speaks volumes about the hollowness of the pro industry policies of Punjab Government and working of the Investment Promotion Group.
The official reason for sale of power plant is its plan to divest assets not central to its main businesses, however the actual reasons may be unforeseen day to day problems .Few years ago when L & T made a bid for thermal plant it was very enthuastic about the project.
The projected cost overrun and its failure to get anticipated profits may be among the reason to sell the project even at loss. PSPCL’s inability to take full power generation from this supercritical plant may be one of the reasons. PSPCL will be paying capacity charges only when plant is not running.
PSPCL is forcing L&T to generate power in the range of 600 MW in daytime and reduce it to around 200 MW during night. It is affecting the boiler life very badly as this being a super critical unit, should run on constant load for best performance and economy. The company is losing about Rs. 2.5 crore per day on account of this.
The railway track to the plant is incomplete due to a court case instituted by a farmer at the instigation by an opposition party MLA who never wanted the ruling party to take the credit of development.
The cost of transportation of coal by trucks from Mandi Gobindgarh to the site of plant and non passing of cost of washing of coal are other irritants
L&T has also been facing problems on account of non passing of benefits for declaring it as Mega Project. The reported loss may be to the tune of Rs. 500 crore. Other benefits not granted includes non compensation of cost to the tune of Rs. 50 crore due to change of site to seismic zone ,non compensation of cost amounting to Rs. 178 crore for dedicated railway corridor.
L&T being a professional company is fed up of all these issues emerging out of negative attitudes prevailing in Punjab Government and PSPCL and thus plans to sell the thermal plant at a loss of more than Rs. 2000 crore.
The Rajpura Thermal plant executed at a total cost of around Rs.9, 600 crore may fetch anything between Rs. 7000 crore to 7700 crore as each megawatt can fetch Rs. 5 crore to 5.5 crore in open market. L & T is projecting a loss of Rs. 2000 crore on the sale of project.
A leading Industrialist from Punjab remarked that L&T plan to walk out of Punjab proves that no honest professional group can survive the inefficiency of the state government and PSPCL He said that while industrialists are treated like gods in Madhya Pradesh and Gujarat, they are dragged in Punjab to face red tapes and legal battles. These have contributed to make Trident and Nahar groups to shift their expansion plans to MP.
It may be mentioned that CERC had carried out a comparative analysis of 14 thermal projects in 2010 that had been awarded under competitive bidding. In case of Rajpura thermal the CERC assessed that the cost plus levelised tariff would be Rs 3.4822 per unit as against the bid rate of Rs 2.89 per unit. CERC had assessed the capital cost of Rajpura project as Rs 6862 Crore. This indicates that L&T figure of Rs 9600 Cr is highly inflated and is being publicized so as to fetch a higher sale price for the project.

NTPC ,India’s largest thermal power generator, would be the most hurt among the country’s rated state-linked electricity utilities by the Indian electricity market regulator’s final tariff order for the upcoming five-year regulatory period from April 2014 to March 2019, Fitch Ratingssays in a report.

There is limited impact on the other two rated power utilities which are NHPC Limited and Power Grid Corporation of India Ltd(PGCIL), which are both rated at ‘BBB-’ with Stable Outlooks.

Fitch estimates that the new tariff order by the Central Electricity Regulatory Commission (CERC) would reduce NTPC’s pre-tax return on equity by around 350 bps. As a result, Fitch will trim its estimates for the company’s EBITDA and profit after tax (PAT) from the financial year ending March 2015 (FY15) onwards by around 8%-11%.

The weaker returns arising from the tariff order means NTPC’s net leverage would be higher than previously expected. NTPC’s net leverage was expected to increase over the next few years due to its large capex programme.

While this will not have an impact on NTPC’s current ‘BBB-’ ratings, which are constrained by India’s ratings of ‘BBB-’ with Stable Outlook, it will however reduce the rating headroom of its unconstrained standalone rating of ‘BBB’, says Fitch.

For thermal generation companies including NTPC, the threshold for full receipt of the capacity charge continues to be linked to a minimum plant availability factor (PAF), which has been cut to 83% for the first three years of the next control period from 85% previously, which will help reduce disincentives in certain plants.

However, NTPC’s profitability will be further reduced because incentives for thermal generators in the next regulatory period will be based on companies reaching a plant load factor (PLF) of at least 85%, rather than the PAF.

PLF is dependent on the ability of the state electricity distribution companies’ ability to offtake power from the plants. NTPC’s coal-based power plants had an average PLF of 83% in FY13, with 10 of its 15 coal-based plants having PLFs of less than 85 per cent.

The coal-based plants’ PLF further fell to 79% for the nine months ended December 2013, implying that even fewer of NTPC’s plants would qualify for the incentives. None of NTPC’s seven gas-based plants have PLFs over 85 per cent.

Furthermore, the CERC has tightened certain operational standards and required sharing of cost benefits with power distributors. Fitch expects that the profitability of NHPC and PGCIL to fall only by 2%-4% from FY15.

As such, their forecast credit metrics will remain largely unchanged from the agency’s previous expectations. NHPC and PGCIL would remain relatively immune to the change in the tax used to calculate pre-tax return on equity as they use the MAT rate.

NHPC’s incentives would still continue to be linked to normative plant availability factor, although the CERC has raised the factor for three out of NHPC’s 14 plants. PGCIL’s incentives are linked to the transmission system availability factor, which has been increased to 98.5 per cent (from the earlier 98%) for alternating-current systems and 96 per cent (95% previously) for high-voltage direct-current systems.

Shares of NTPC Ltd hit a five-year low, as the Central Electricity Regulatory Commission further tightened its noose on operating norms for power generation companies in its 2014-19 (Apr-Mar) tariff structure.

India’s largest power generation company’s shares closed at Rs 116.90 on the NSE, down 11.7% while Power Grid was down 0.40 per cent at Rs 94.75.

CERC, in its final guidelines for tariff fixation released Saturday, has shifted the incentive structure to plant load factor from plant availability factor in the previous norm for the period 2009-2014 (Apr-Mar). The regulator also maintained the base return on equity on transmission systems at 15.5%, which is much lower than 18-20% sought by companies.

In its draft regulations released in December, the commission had suggested an incentive linked to plant load factor of a power unit, which was strongly opposed by the industry, especially by the biggest player NTPC. Plant availability factor in relation to a generating station for any period means the average of the daily declared capacities for all the days during the period.

On the other hand, plant load factor for a thermal generating station or unit for a given period refers to the total sent out energy corresponding to scheduled generation during the period.

NTPC had argued saying PLF was beyond a power company’s control and had requested the regulator to go back to the incentive linked to PAF. The commission has also brought down the PAF threshold for availing the incentive to 83% from 85% earlier.

“NTPC would be worst hit due to across-the-board cut in its incentive grossing up of tax on actual tax paid v/s applicable tax rate to hit NTPC,” global brokerage firm Bank of America Merrill Lynch said in a report.

“Provided that in view of shortage of coal and uncertainty of assured coal supply on sustained basis experienced by the generating stations, the NAPAF (Normative Plant Availability Factor) for recovery of fixed charges shall be 83% till the same is reviewed,” the regulator said.

Incentives based on PLF would depend on actual power generation, a scenario that could result in lower income. However, in a move that would be a major disadvantage for NTPC, the commission has retained its decision to remove the tax arbitrage that existed when companies like NTPC charged a higher tax rate from its customers leading to a tax arbitrage for NTPC alone at around 5 bln rupees a year.

Norms for 2009-14 allowed utilities to retain tax benefits applicable to power projects by recovering higher tax from beneficiaries than the actual income tax paid. However, the new norms limit the recovery of tax to the actual tax paid by utilities.

“…the effective tax rate shall be considered on the basis of actual tax paid in the respect of the financial year…The actual tax income on other income stream (i.e., income of non-generation or non-transmission business, as the case may be) shall not be considered for the calculation of ‘effective tax rate’,” the commission noted.

Opposing the move in the draft regulation, NTPC had argued saying its new projects planned in the coming years as per their power purchase agreements signed with different beneficiaries requiring investment of around 4.80 trln rupees would be adversely affected.

Other key regulations include a ‘special allowance’ for coal and lignite based power plants that could be availed and following which the revision of capital cost would not be allowed and applicable operational cost shall not be relaxed.

“In case of coal-based/lignite fired thermal generating station, the generating company, instead of availing R&M may opt to avail a “special allowance…as compensation for meeting the requirement of expenses including renovation and modernisation beyond the useful life of the generating station or a unit thereof, and in such an event, revision of the capital cost shall not be allowed and the applicable operational norms shall not be relaxed but the special allowance shall be included in the annual fixed cost,” the regulator said.

It added the special allowance would be 750,000 rupees per megawatt a year for 2014-15 (Apr-Mar) and would be escalated at 6.35% every year during the tariff period till Mar 2019.

- See more at: http://freepressjournal.in/cerc-shifts-to-plant-availability-factor-under-14-19-tariff-norms/#sthash.2MVwyZh6.dpuf

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